Santos : 2020 Third Quarter Activities Report

Record quarterly production and sales volumes

• Third quarter production of 25.1 mmboe was a record for Santos and 22% higher than the prior quarter
• Production was higher in all five core assets, primarily driven by higher domestic gas and LNG volumes
• Quarterly sales revenue of US$797 million was 2% higher than the prior quarter, demonstrating the strength of Santos' diversified portfolio of fixed-price domestic gas contracts combined with a higher equity level in Bayu-Undan, which more than offset lower JCC-linked LNG pricing
• Santos' disciplined operating model continues to drive costs lower, with 2020 upstream unit cost guidance lowered to US$8.25-8.75/boe

Strong free cash flow and low breakeven oil price

• Santos generated US$143 million in free cash flow in the quarter, bringing total free cash flow for the nine months to-date to US$574 million
• Targeting 2020 free cash flow breakeven oil price of less than US$25 per barrel (before hedging) and approximately US$20 per barrel (after hedging)
• Net debt at the end of September was US$3,677 million and gearing was 33.6%

Growth projects progressing while maintaining flexibility in commitment timing

• Barossa LNG project continues to progress toward FID-ready status by year-end, subject to business conditions, joint venture agreements and relevant approvals, while pre-FEED work continues on the Dorado oil project
• Moomba CCS project progressing well through FEED with the successful completion of a CO2 injection trial into the target storage formation
• Narrabri gas project received approval from the New South Wales Independent Planning Commission

Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos had delivered another solid quarter, highlighted by record production and sales volumes, and another strong free cash flow result.

'Our disciplined, low-cost operating model continues to drive strong performance across our diversified asset portfolio.

'The operating model combined with our portfolio of fixed-price domestic gas contracts, enabled us to deliver higher quarterly revenues and consistent free cash flow generation despite the impact of significantly lower oil price-linked contracted LNG prices. We expect the third quarter to represent the trough for LNG prices, with higher prices expected in the fourth quarter based on current JCC oil-linked and JKM spot pricing, with JKM currently above US$6/mmBtu for December delivery.

'Our base business is strong with production levels expected to remain relatively steady for the next five or six years, allowing us to continue to progress our major capital projects while maintaining capital discipline and flexibility in commitment timing.

'As COVID-19 and the lower oil price continue to challenge us, we have remained resilient with stable revenues and consistent free cash flow generation from the core assets. Our balance sheet is strong and we remain well positioned to leverage our growth opportunities when business conditions improve,' Mr Gallagher said.